3 Overtime Pay Policy Repercussions

The Department of Labor's new overtime regulations don't go into effect until December, so there is time to prepare. But they come with a side of unintended consequences.

It's official: The long-awaited Department of Labor overtime regulations go into effect on December 1, 2016, leaving HR executives just over three months to prepare.

The changes needed to accommodate the new regulations may not be simple.

"This is too much, too soon," says Tim Garrett, an attorney specializing in employment law with the Bass, Berry and Sims law firm in Nashville. Garrett doesn't necessarily disagree with increasing overtime pay or workers' wages, but the abrupt implementation of these regulations will create hardships for many employers, he says.

Garrett gives the DOL credit for allowing some transition period—the agency "could have implemented this [in] as quickly as 60 days," he says—but even with the December deadline, Garrett predicts that many employers, including some hospitals and health systems, will have difficulty adjusting.

"I'm not saying overtime pay shouldn't be increased, but this should be done in more responsible manner… The regulations currently don't recognize some unintended consequences," he says, naming three:

1. Less Flexibility

Most healthcare leaders can remember putting in a day lasting longer than eight hours fairly early in their careers, whether to put some extra time in on a project, to help out a new coworker, or to organize a social activity at work.

Under the new rules, employers will have to tally time worked more rigorously and pay for any work performed outside regular business hours. Work-related activities include checking email or voicemail, doing work-related research, and making work-related travel arrangements.

If your instinct is to shrug this concern off as an overreaction, think about this: how many of the hospital's employees have access to work email on their smartphones?

"We have organizations realizing they can't let their employees synch their smartphones. Checking email might count as work off the clock… Stuff people used to do at home on their own time can't be done anymore," says Garrett.

2. Less Room for Advancement

Another unintended consequence of the new regulations is that it will become harder for young workers to make the leap into management, says Garrett.

As organizations tighten up on tracking hours worked, healthcare leaders may find they have less room for trial and error in hiring and promoting workers to the managerial level.

"With folks in entry level management roles, it used to be that you could hire two [candidates]," Garrett says. But no more. He says that rules around exemptions will force organizations to instead hire one experienced manager who is more likely to accomplish their job in the allotted eight hours.

"We'll be losing the chance for younger people to get started," Garrett says.

3. Lower Morale

Diminished opportunities for advancement come with a price: decreased morale.

"I don't think our sense of meaning comes from our pay," says Garrett. "For the most part, our sense of meaning comes from being valued within our organization. And that meaning is so much more than pay."

Workers might first feel excited to see a couple extra dollars in their paychecks for working extra hours, but that joy will be short-lived as they realize they are now required to painstakingly track every moment dedicated to work-related activity, that their options for advancement are limited, and that employers' budgets are tighter, Garrett says.

Some workers will inevitably be reclassified—a few workers that might have preferred non-exempt status might become exempt, but some workers that were previously classified as exempt will become non-exempt—which can be disheartening enough to kill the even the most passionate worker's morale.

The best way to communicate these changes to workers? Sensitively.

"I would suggest HR people be very transparent," Garrett says. And don't grouse about the changes too much, he cautions. "You may be planting the seeds of the very weeds you are trying to uproot."